venture-capital
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which hav ...
firm in the U.S., founded in 1946 by partners
John Hay Whitney
John Hay Whitney (August 17, 1904 – February 8, 1982) was U.S. Ambassador to the United Kingdom, publisher of the ''New York Herald Tribune'', and president of the Museum of Modern Art. He was a member of the Whitney family.
Early life
Whit ...
and Benno Schmidt. Today, the firm focuses primarily on leveraged buyouts, turnarounds, acquisitions, and recapitalizations of more mature companies, particularly those it considers to be in the middle market. The firm is based in New Canaan, Connecticut.
Investments
The firm, which today is known as Whitney & Co. and also J. H. Whitney Capital Partners, LLC, continues to make investments in leveraged buyout transactions, and raised $800 million for its sixth institutional
private equity fund
A private equity fund (abbreviated as PE fund) is a collective investment scheme used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity ...
in 2005. The $800 million raised in 2005 were a significant decrease from its previous funds, when the firm raised $1.1 billion in 2001 and $975 million in 2000 for Whitney V and IV, respectively. The performance of the 2000 vintage fund IV in particular was impacted by the firm's exposure to technology and internet businesses.
History
Founding and early history
J. H. Whitney & Company was founded by John Hay Whitney, who put up $10 million after World War II to finance entrepreneurs with business plans who were unwelcome at banks. Mr. Whitney brought in Benno Schmidt as his partner to run the company. When starting the company, Whitney wanted a broad team of young experts to be his deputies. He went to the deans of
Harvard Business School
Harvard Business School (HBS) is the graduate business school of Harvard University, a private research university in Boston, Massachusetts. It is consistently ranked among the top business schools in the world and offers a large full-time MBA p ...
, Yale Law School, and the MIT Graduate School of Engineering and asked each man who the best student they produced in the past five years was. The HBS dean cleverly responded that he was insulted that Whitney would think that he would simply rank his best students and hand the list out, but that if he was to do such an outrageous thing, he would rank C. Wrede Petersmeyer, a graduate the previous year, first. Whitney hired Petersmeyer the next day, and he went on to become a partner at the firm and run Whitney Communications.
Whitney had been investing since the 1930s, founding Pioneer Pictures in 1933 and acquiring a 15% interest in
Technicolor Corporation
Technicolor is a series of color motion picture processes, the first version dating back to 1916, and followed by improved versions over several decades.
Definitive Technicolor movies using three black and white films running through a special ...
with his cousin Cornelius Vanderbilt Whitney. What is considered today to be true private equity investments began to emerge after World War II, marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation and J. H. Whitney & Company.
Whitney became a highly professional organization, whereas before World War II, venture-capital investments were primarily the domain of wealthy individuals and families. Schmidt, in fact, is credited with coining the term "venture capital", originally known as "development capital". The company was originally described as a lender of "private adventure capital" and Schmidt shortened the term.Cuff, Daniel F. BUSINESS PEOPLE; Deal for Prime Pleases Partners at Whitney " New York Times, June 26, 1989
By far, Whitney's most famous investment during this period was in Florida Foods Corporation. The company developed an innovative method for delivering nutrition to American soldiers, which later came to be known as
Minute Maid
Minute Maid is a product line of beverages, usually associated with lemonade or orange juice, but which now extends to soft drinks of different kinds, including Hi-C. Minute Maid is sold under the Cappy brand in Central Europe and under the bran ...
In response to the changing conditions, in the venture-capital industry in the 1980s, Whitney (and other early venture-capital firms including Warburg Pincus) began to transition away from venture capital toward leveraged buyouts and growth capital investments, which were in vogue in that decade.POLLACK, ANDREW. Venture Capital Loses Its Vigor " New York Times, October 8, 1989.
Whitney's most public foray into the leveraged-buyout space came in 1989, when it completed the acquisition of Prime Computer. In 1988, " corporate raider"
Bennett S. LeBow
Bennett S. LeBow is an American businessman and philanthropist. He is the current chairman of the board of Vector Group.
Education and career
LeBow was born to a Jewish family,MAI Basic Four, began an attempted $970 million hostile takeover of Prime Computer. Management resisted LeBow's advances and eventually agreed to a $1.3 billion leveraged buyout, with Whitney acting as a
white knight
A white knight is a mythological figure and literary stock character. They are portrayed alongside a black knight as diametric opposites. A white knight usually represents a heroic warrior fighting against evil, with the role in medieval literatu ...
. For Whitney, owning Prime proved to be nearly a total loss with the bulk of the proceeds from the company's liquidation paid to the company's creditors.
Whitney completed other buyouts in the 1980s, including the acquisition of retailer Filene's Basement.Campeau Sets Sale of Unit " New York Times, June 10, 1988